Robert had a good post here yesterday on Senator Elizabeth Warren’s ridiculous plan to zero out the student-loan debt for around 34 million Americans, cancel some amount of debt for around ten million additional people, take the price of tuition and fees to zero for two- and four-year public colleges, and significantly expand federal funding available to cover non-tuition expenses.
I’d add to his points that what matters here is lifetime income. A 20-something college graduate with $40,000 in student debt who is earning, say, $60,000 per year, would have her debt completely eliminated under Seantor Warren’s plan. You probably don’t think of a person earning $60K as rich, and you shouldn’t. But this person’s salary will grow over time, and over her lifetime she will earn several million dollars. It’s that latter amount that matters when thinking about student debt, not a person’s annual salary at the beginning of her career. Taxpayer dollars should not be used to cancel student debt held by people in this circumstance.
It is the case that some people — though not nearly as many as Warren implies — are struggling under the weight of their federal student loans. But we already have a safety net in place to deal with those loan situations. For example, income-based repayment plans adjust monthly student loan payments based on family composition and income, and allow for outstanding balances to be forgiven under some circumstances after a couple decades. Why aren’t these programs adequate?
Robert mentioned that the “student-loan debt crisis” is overblown, but it bears repeating. From my latest Bloomberg column:
Debt forgiveness on the scale she proposes presumes a student debt crisis where one does not exist. A 2014 Brookings Institution paper by higher-education experts Beth Akers and Matthew M. Chingos finds that the monthly payment burden of borrowers has not increased over the past two decades, with the median borrower spending around 4 percent of monthly income on student loan payments. Akers and Chingos conclude: “Americans who borrowed to finance their educations are no worse off today than they were a generation ago.”
The senator’s plan to make public college free is also misguided. We need to stop sending the signal to our youth that a four-year college degree is the best choice for everyone, and we need to focus resources on creating and advancing new educational models (that aren’t the traditional four-year bachelor’s degree) to make sure workers can command high wages and compete in the modern economy.
To top it off, Senator Warren would pay for this with her deeply misguided “Ultra-Millionaire” — her name, not mine; and I’m not making that up — wealth tax.
Check out my column for my full argument. Your comments are very welcome.